U.S. State Fiscal Policy and Natural Resources
No 2014-02, Working Papers from University of Alaska Anchorage, Department of Economics
An analytical framework predicts that, in response to an exogenous increase in resource-based government revenue, a benevolent government will partially substitute away from taxing income, increase spending and save. Fifty-one years of U.S.-state level data are largely consistent with this theory. A baseline fixed effects model predicts that a $1.00 increase in resource revenue results in a $0.25 decrease in non-resource revenue, a $0.43 increase in spending and a $0.32 increase in savings. Instrumenting for resource revenue reveals that a positive revenue shock is largely saved and the rest is transferred back to residents in the form of lower non-resource tax rates.
Keywords: Severance Tax; Fiscal Policy; Natural Resources (search for similar items in EconPapers)
JEL-codes: Q38 H20 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-pub
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Forthcoming in the American Economic Journal: Economic Policy
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Journal Article: US State Fiscal Policy and Natural Resources (2015)
Working Paper: U.S. State Fiscal Policy and Natural Resources (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ala:wpaper:2014-02
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